Impact Investing, Finance

Are Women-Owned VC Funds A New Arm of the Resistance?

Are Women-Owned VC Funds the key to accelerating access to capital for women?

There are an estimated 11.6 million women-owned businesses in the United States that employ nearly 9 million people and generate more than $1.7 trillion in revenues. Despite these impressive numbers, there is still room to grow. Women-owned businesses are small, and 99.9% of them have fewer than 500 employees. They are also concentrated in certain areas, like health care and education. If women are going to see full equality in this economy, we need more women making decisions about what new ideas and products get funding. Luckily, fearless women’s VC funds are leading us the way and becoming the new arm of the resistance.

According to Huffington Post and Fortune magazine, Thirty-two female CEOs head the 500 biggest companies in the United States, a record number in the Fortune 500’s 63-year history, but women only represent 6 percent of the CEOs on the list, and there were no black female CEOs.

Despite A Growing Number Of Female Entrepreneurs, Only 2% Of Venture Capital Goes To Female Founders

In 2017, female founders only get two percent of venture capital dollars.  Currently, about 7% of partners at top VC firms are women, according to an analysis by TechCrunch. The trend might be slowly changing. Take the example of Theresia Gouw, the co-founder of Aspect Ventures, one of the first female-led venture investing firms in Silicon Valley according to Forbes. She has become the richest female VC in the U.S.  Gouw founded All Raise, an organization that supports the success of female founders and investors in Silicon Valley by developing a data-driven approach to focus on the most effective solutions. All Raise highlights that only 9% of decision-makers at US-based venture capital firms are women, and 15% of US venture dollars in 2017 went to teams with a female founder. Gouw talks the talk and walks the walk: 40% of Aspect’s portfolio includes a female co-founder.

A study published by Bloomberg shows that traded companies run by a woman perform far better than the market, backing up the approach of funds like Aspect Ventures. It’s not just good for equality, it’s good for business. Positive change comes from a new form of finance activism developed by a women’s VC fund community.

How do we increase funding in female-owned businesses when 85% of the key partners at VCs are male?

No offense to men, but a grand majority might not understand women’s ideas and products because they do not feel concerned about it. It might be as simple as that. As the white male still dominates the VC industry, its workforce and power leadership structure has started to transform. Women are getting organized to support each other in what I call a new form of finance activism. While female venture capitalists are getting organized to change the VC landscape from within, female-focused vc funds are on the rise to invest in female and minorities only companies.

Take the example of Arlan Hamilton, she is a gay black warrior woman who went, from being homeless and poor, to developing her own VC fund. Her incredible story made it to the acclaimed startup podcast series. 

Hamilton invested in Tinsel. Tinsel creates wearable tech jewelry for women, addressing their essential tech needs through high-quality, highly fashionable fashion accessories like Meet The Dipper, an audio necklace that sounds as good as it looks! She also invested in Tresse Noire, on-location beauty services for women of color across the country. 

‘m looking for someone who gives me goosebumps basically people who are just tackling something whether it’s life-changing or day making. They can’t stand not to do themselves” Through her fearless conquering attitude, Hamilton is showing the way to many women and minorities that it is ok to ask for a seat at the table, that you actually deserve it and do not need to be apologetic about it.

Some other companies like SheEo aim to radically change the traditional approach to female investment. 500 women invest $1100 in each year cohort as an Act of Radical Generosity. The goal is to reach 1M Investors to support 10,000 women-led Ventures and create a $1B perpetual fund to support women for generations to come.

The More Women Get Educated About Investment, The More Impact They Will Have On Changing The World

As women are getting organized to finance other women, Ellevest is about educating women about finance and investment. Ellevest’s founder Sallie Krawcheck wants to help women retire rich. The more women start learning about investing and making money from their investments, the more it will support the women-owned business ecosystem. Like any time in history, change will happen when women get organized to support women and minorities. This trend is seen with the Women’s March, the Me Too movement, Black Lives Matters and Diversity and Inclusion accountability around technology companies.

These New Trends Can Be Tied To The Growing Movement Of Impact Investing

Some other organizations focus on a new trend called Impact investment. As we noted in part one of Be Your Change podcast series, impact investment is particularly rising amongst millennials, with one survey showing 79 percent of millennials wanting to invest in both socially and financially impactful ways. People want to be part of a movement that is creating a more conscious society.

Rosa Lee Harden co-founded Social Capital Markets, or SOCAP, a large network of investors and entrepreneurs who want money to flow toward the greater good and are part of the social impact movement.   

We have to start investing in a way that protects the planet that protects its people. And I’m really hopeful that this movement is going to have a lot to do with that

 

Sustainable Impact. How women are key to ending poverty

Laina Raveendran Greene is the co-founder of Angels of Impact

Based in Singapore, the fund invests in responsibly produced goods made by women living in poverty. They connect women-led social enterprises that are helping alleviate poverty, connecting them to investors as well as markets. I talk to her about her journey to launch her own VC fund from the desire to align her values, business skills and her will to have a positive impact on the world. She is also the co-author of Sustainable Impact. How women Are Key To Ending Poverty 

So we have this fundamental premise that there are many people out there who actually have done well for themselves. But they all are searching for more meaning in their lives, and they want to do things that are meaningful. Some of them have contributed to charity, but being capitalists themselves and having made their money as an entrepreneur, they kind of feel a little bit awkward with just pure charity you know. They want to be more hands-on involved, they want to help the business grow. So we began to look for people like that. 

 

Few Takeaways

Go Deeper (Tip: Make sure to buy secondhand books, it’s much better for the environment)